Pre-Requisites before Conversion of Partnership firm into Company
- Partnership firm to be registered with the Registrar of Firms (ROF)
- Partnership deed must contain the provision for conversion of firm into Company.
- Partnership firm should have minimum 7 Partners for conversion into Public Company and Minimum 3 directors in case of Public Company. (2 in case of Private Company)
- All partners of the partnership firm shall become shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion.
- The partners receive consideration only by way of allotment of shares in company.
- If the above requirement is not fulfilled by the firm, then the Partnership deed should be altered.
Procedure for Conversion of Partnership firm into Public Company
1. Convene meeting of partners
- To execute a supplementary Partnership Deed to align it with the requirement of the act.
- To Take assent of 3/4th partners at a general meeting summoned for the purpose of registering the firm as a company.
- To authorize one or more partners to take all steps necessary and to execute all papers, deeds, documents etc. pursuant to registration of the firm as a Company.
2. Apply for Digital signature of proposed directors.
3. Apply for Director Identification Number of proposed director in Form DIR-3
Documents required for DIN
- Aadhaar Card
- PAN Card
- Passport size photo
4. Apply for name in “Reserve Unique Name (RUN)”
5. Publish Newspaper Advertisement:
A notice in the form URC-2 is required to be published in 2 newspapers, one English daily and another in regional language where the office of partnership is situated.
File form URC-1
Following details required for filing URC-1
- SRN of RUN
- Name of partnership firm/ registration No (if any), Number of partners
- Date of partnership deed
- Date of partners resolution
- Total amount of property
- Secured debt (if any)
Attachment in form URC-1
- Particulars of Partners and Shares held by them;
- Affidavit duly notarized from all the partners for dissolution of the firm;
- Declaration by 2 directors verifying the particulars of members;
- Copy of the Partnership deed;
- Copy of certificate of registration of the entity, if any;
- Copy of Newspaper advertisement; (FORMAT GIVEN)
- Certificate from a CA/CS/CWA certifying the compliance with all the provisions of Stamp Act, to the extent applicable;
- A copy of latest IT return;
- Undertaking from Directors for compliance with requirements of Indian Stamp Act, 1899;
File Form SPICE-32, e-MOA and e-AOA
- Affidavit and declaration by first subscriber(s) and director(s)
- Proof of Office address (Conveyance/ Lease deed/ Rent Agreement etc. along with rent receipts)
- Copy of the utility bills (not older than two months)
- Resolution of Partners regarding Conversion
Benefits of Conversion of Partnership Firm into Company
- All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.
- All movable and immovable properties of the firm automatically vest in the Company. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
- No Capital Gains tax shall be charged on transfer of property from Proprietorship firm to Company.
- The goodwill of the Proprietorship firm and its brand value is kept intact and continues to enjoy the previous success story with a better legal recognition.
- The accumulated loss and unabsorbed depreciation of Partnership firm is deemed to be loss/ depreciation of the successor company for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor company.